Separation of Money & State

Every passage, on the record.

1. 00:37Quote

   The Fiat universities have died off

2. 01:14Quote

   This podcast happens to be the Dead Sea Scrolls of what it was like to be alive at this time.

3. 01:14Analogy

   This podcast happens to be the Dead Sea Scrolls of what it was like to be alive at this time. We can't do a disservice, what a disservice it would to those individuals, to at least lay the groundwork for exactly how misguided the vast majority of the people were when it came to the separations of money and state.

4. 01:46Claim

   This idea of separating money and state, it's the same thing as separating church from state. It's a big deal. It wasn't easy before. It is easy now.

5. 02:19Claim

   The answer right now is no, the government actually doesn't create money. Banks create money, which are a separate entity, but there's going to be a lot of overlap.

6. 02:49Claim · condensed

   You often hear people say that the federal government, especially the US federal government, can just print money into existence. That's not exactly the way that it works, and being loose with those definitions leads to confusion further on.

7. 03:28Claim

   For our purposes here, let's assume that governments have the power to siphon your energy to do with it what they will, energy that has already been transformed by the constituents, by the populace, by the people of that country.

8. 04:36Claim

   The vast majority of people outside the financial world still believe that the government funds itself through taxes, and it's easy to understand why: for most individuals, they can't create money through debt on a large scale, so they figure the government can't either.

9. 05:06Analogy

   For the vast majority of individuals, they can't create money through debt on a large scale. So they just don't apply it to that. If I can't do it, the government can't do it. And there's no point in me thinking that there's any other way to get energy off of me than to just ask me for it and I will pay it.

10. 06:14Prediction

    The interest that is being paid on this happens with new debt creation, it's just completely, it's rolling over from one to the next, which is why we are going to see infinite money printing, I say money printing, infinite money siphoning on the side of the government.

11. 06:44Claim · condensed

    They sell bonds that are bought by institutions, so the economy is lending money to the government, but banks create the money to buy those bonds, and the Eurodollar system in particular sets interest rates based on its own balance sheet activities.

12. 06:44Event · condensed

    Banks have learned since 2008 that they cannot rely on the backstop of the federal government, because banks operate outside that jurisdiction and the government does not have the capacity to predict or act fast enough to save them from solvency issues.

13. 07:53Claim

    This is why we continue to see these legacy institutions, these government institutions, continually misread the level of control they have over the global economy.

14. 08:25Idea

    This basically gives governments then the ability to siphon energy from the system through the dilution of energy reserve controls.

15. 08:55Claim

    It's the fact that those two coexist in the same institutions, money creation and acting as financial intermediaries, matching lenders and borrowers, depositors and creditors, coupled with the ability to create money. That is where the problem lies.

16. 09:29Claim

    The easy answer is, if that is the problem, then we just stop money creation altogether, we can't have someone trusted to be able to do the money creation because that's always going to create problems. That's essentially what Bitcoin has done.

17. 09:29Reference

    This goes back to the tragedy of commons from the last podcast that we talked about.

18. 09:29Claim

    You give people power and it will be abused eventually. The temptation to get something for nothing is too powerful, especially if you're able to dilute away the negative impact from yourself onto as many others as you can so that it masks the effects.

19. 10:37Claim

    It really is, it's not the government debt, the number, that's not important so much as why the government debt exists in the first place. The figure is the symptom. What is the cause of that symptom?

20. 11:08Idea

    The most amount of human flourishing is the goal of the system, which we know means the most amount of control over accessible energy reserves, which means you have to transform them from an inaccessible form to an accessible one, and that happens through entrepreneurship, through creative destruction, through exchange.

21. 11:08Reference

    The extended order. That is what we're trying to optimize for. At least that is what most people will tell you, right? They want the most amount of human flourishing possible.

22. 11:39Claim

    By the definition of the current government, it transforms nothing. And if it isn't transforming energy and it is only reallocating already transformed energy, well then the goal would be to allocate it so well that it returns more than it spent.

23. 12:15Claim

    It doesn't take more than a single interaction in modern day with any government institution to know that government agencies are not responsible allocators of energy; they are not answering the needs of the market in the most efficient manner.

24. 12:15Reference

    If we go back to probably the most cited quote on this podcast, which is the Thomas Sowell one.

25. 12:15Quote

    There are no solutions in economics, right? There are only tradeoffs.

26. 12:48Claim

    The closer we can keep the circle of control over energy reserves to those individuals who transformed them in the first place, the more productive the extended order is going to be as a whole, because no one is going to take as good care of transformed energy than the person that had to put in the energy in the first place.

27. 13:22Claim

    The problem stems from this idea that the government will go into the market and misallocate energy, and that misallocated energy will return less energy than it took to transform originally.

28. 13:52Claim

    When they remove it, not only are they misallocating, but they're removing that energy from possibly growing, so you're losing the opportunity cost too. The more wasteful that spending becomes, the more the government has to chase with further misallocation.

29. 14:40Claim

    This is a classic Austrian economics idea of government intervention: how they seemingly think to solve one problem is actually causing another, which then requires government to get even larger to solve the problem that they actually caused in the first place, a never ending spiral downwards into the misallocation of energy.

30. 14:40Reference

    This is a classic Austrian economics, this idea of government intervention.

31. 15:10Analogy · condensed

    Let's say that the total joules in the economy, when they're transformed, is 100. The government spends 35 joules, gets 30 back. The private economy, through exchange, has a banger year and gets back 70 having spent 65, so you're right back at 100. The government sees no growth and spends 40 the next year, gets 30 back, leaving the private sector only 60 joules to spend, but deflationary technology lets it return 70. The government looks at its 40 joules of spending and sees it's still only back at 100 joules; every time the government grows, it is removing resources from the private sector.

32. 15:10Idea

    That's the total accessible supply of energy in the economy, the TASOE, essentially what Bitcoin is. The 21 million represents is that TASOE.

33. 17:44Analogy

    Imagine if they could not monetize the debt, if they had to collect taxes to fund this stuff. You'd have to show people what they were paying for, where the energy that they were giving to the government was going and what the returns were. You'd have to actually be responsible for your allocation, and that's the opposite of what needs to happen to be this grossly inefficient.

34. 18:15Prediction

    Without the ability to steal from its constituents, this essentially goes away, and Bitcoin makes this a reality, so governments will be forced to be accountable for their services provided. Does this mean the governments are going to go away? No, but their power is drastically reduced.

35. 18:15Reference

    It essentially boils down to this Montesquieu quote from the Enlightenment, which is the more people are trading with one another, the less that they are fighting.

36. 18:15Quote

    The more people are trading with one another, the less that they are fighting.

37. 18:54Reference

    If we combine this idea with another one that John Locke had and is famous for.

38. 18:54Claim

    It's less efficient for every individual to protect themselves and to enforce their rights; we would be less productive as an extended order versus employing independent third parties to resolve conflicts or inconveniences.

39. 19:28Analogy

    Imagine if you had to do that on your own. If every single entity was responsible for ensuring that their rights were kept and that they had to protect themselves, that's incredibly inefficient.

40. 19:28Claim

    There is a role for a neutral arbiter because they will save energy through efficient allocation of it, nonviolent resolution based on the rule of law. And the big argument here is that law emerges from society rather than imposed from regulation.

41. 19:28Quote

    Law emerges from society rather than imposed from regulation.

42. 19:59Claim

    We need firms specialized in neutral arbitration because overall it makes us more efficient, because if we all have to focus a tiny bit of our attention or energy towards ensuring that our rights are not being infringed or impaired, then in total that makes us less efficient. Individual rights are property rights for life, liberty, property.

43. 19:59Quote

    Individual rights are property rights for life, liberty, property.

44. 20:32Claim

    In the most ideal form of the state or of government, there would be no regulation of what people can and can't buy or sell, no regulating who they can trade with, and no price controls, you can't say how much a good or service can be charged. All of those things are violating people's rights.

45. 21:11Claim

    Government is just a group of people with limited knowledge of the extended order; they are not going to be as efficient at allocating energy as the free market. Every time they step in to fix something, they cannot know the unintended consequences that it's going to have.

46. 21:43Claim

    Each fix leads to more fixes, which increases the size of government and clouds the true market, making it less efficient. And the answer is more fixes, it's always more fixes, which exacerbates the problem even further.

47. 21:43Claim

    For Bitcoin holders, even tax collection becomes significantly more difficult because you cannot block those off-ramps that you can in the legacy system. The ability to seize assets is so much cheaper in the legacy system than it is in the Bitcoin world.

48. 22:17Prediction

    This is the first, well, not the first, but this is one of the early dominoes that falls for what is going to happen when one government, two governments begin to see the benefits of early adoption into Bitcoin. This really kicks off the game theory because you cannot stop Bitcoin. You cannot stop the flows.

49. 22:17Quote

    You cannot stop Bitcoin.

50. 22:52Prediction

    If you decide that your jurisdiction is going to put up these fake walls around this technology, all of that capital, all of that energy is going to go elsewhere, and it can happen instantaneously, and you can't do anything to stop it. So if you can't stop it from flowing out, why put up the walls in the first place? You're only trapping individuals at that time.

51. 23:26Quote

    Capital controls no longer work.

52. 23:26Prediction

    If these people in these governments are in the right positions and they start to do some of the simple math around a small initial allocation, that quickly turns into a large allocation, which quickly turns into we can front run the entire world based on this absolute scarcity. That kicks off one of those days where we will wake up and the price will not have gone up 10 percent, it will have gone up 100 percent, and the next day it will go up again, and the next day it will no longer be denominated in dollars. You will no longer be able to trade fiat for Bitcoin.

53. 23:57Prediction

    Everything points to this being the reality because it outcompetes in energy allocation and in energy efficiency, and if that is the case, it's just a matter of when. It could happen tomorrow, could be that day, but it could also be decades. But at this stage, the snowball is rolling, it's going too quickly, it's grown too large.

54. 24:28Quote

    The cat is out of the bag.

55. 24:28Claim

    There are enough incentives in place to ensure that everything that needs to get done will get done, and the beautiful part about Bitcoin is the incentive model, is the rewards. What is best for the individual is also best for the entire network.

56. 24:28Quote

    What is best for the individual is also best for the entire network.